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Appeared on: Friday, June 22, 2012
MediaTek To Invest In Rival MStar Semiconductor

MediaTek Inc. will make a tender offer to acquire 40% to 48% shares of MStar Semiconductor, Inc.

MediaTek's tender offer plans to acquire MStar shares for 0.794 MediaTek shares and NT$1 in cash per MStar share. MediaTek targets to purchase 212 million to 254 million MStar shares through this offer.

Upon the completion of the tender offer and subject to approvals from relevant authorities, MediaTek plans to conduct a follow-on merger with MStar and expects to complete the merger process in early 2013.

MStar Semiconductor, Inc. is a fabless semiconductor company specializing in mixed-mode integrated circuit technologies, based in Hsinchu Hsien, Taiwan. The company makes stuff for multimedia and wireless communications, in the form of display ICs and mixed-mode ASIC/IPs, in addition to chip sets for GSM mobile handsets. The company is listed on the Taiwan Stock Exchange.

Mr. MK Tsai, Chairman of MediaTek, commented, "MediaTek and MStar both possess competitive advantages in the fields of wireless communication and digital home. In light of the recent trends of industry consolidation, this transaction is expected to become a new milestone for the IC design industry. Upon completion of the merger, the two companies will utilize their respective strengths and leverage their resources to hone in our focus on developing new products and next generation technologies. Facing intense worldwide competition and fast-changing market dynamics, we believe that the combined company will be in a strong position to compete and will further elevate MediaTek's global competitiveness."

Mr. Wayne Liang, Chairman of MStar, commented, "MStar and MediaTek both have track records of solid R&D capabilities and robust execution and demonstrate excellent performance in various product categories. After combining the two outstanding companies, we expect to see a more efficient allocation of both companies' resources, which will allow for sustainable, long term growth. Furthermore, we hope this transaction will pave the way for industry consolidation which will enhance the global competitiveness of Asian IC design companies."

If approved, the merge would give the combined company a huge share of the TV SoC market. According to DisplaySearch research, in Q4'11 the combined market share was 68.8%. It is the final step in a consolidation endgame that has played out for the past two years with the disappearance of Broadcom, Micronas, NXP, Trident and Zoran. Renesas has already signaled the end of development of new TV SoC products. As this consolidation was playing out, and as some of the Japanese TV makers pulled back on in-house production, MediaTek, and to a much greater degree, MStar, gained share, picking up more than 20% combined from Q4'10 to Q4'11.

Such a big market share must raise the interest of anti-trust authorities ? many countries would typically consider 70% to be a monopoly position.

MediaTek has fought a bruising war to prevent MStar from gaining a foothold in the lucrative GSM chipset market, which MediaTek dominates. Buying out the competition puts the GSM business on a firmer footing to harvest a declining market.